Hai,

I am an Indian, presently working for a USA company. I will be in US for next 2-3 years and then I will return back to my country. My employer gave the option to enroll for 401K plan or Roth 401k or a combination of both. And the employer matches my contribution at the rate of 50cents on a dollar.

I do not want to keep my money in these accounts till I reach 59.5 yrs old. I am aware of the 10% penalty of early withdrawal of 401k money + taxes. I guess this is the same case with Roth 401k as well for early withdrawal. Right?

I opted for the combination (401k and Roth 401k) last year and have been funding (contributed 15000$ total last year) the account since then. But I always have the confusion whether I should have gone for only 401k or only Roth 401k. Reason: If I am going to pay taxes for both funds for early withdrawal, why not go for only 401k option, with which I get at least tax benefits during the funding period.

Which one is good for my case? Please advice.

Also,

* is it possible to transfer the money to Indian based IRA account?
* or is it not worth contributing to a retirement account at all for my case?

Appreciate your time and help.

Thanks!

It is possible that the 401K will grow enough to offset the 10% Early Withdrawal Penalty.

However, if you are willing to tranfers the money to a Indian-based IRA account, why NOT do the same for a U.S.-based IRA? It beats all to hell the cost of the early withdrawal.

As for the ROTH 401K, you can withdraw what YOU put it in tax-free, but you will pay a penalty if you withdraw the earnings or the match.

Thanks a lot, ATE. This clarifies my doubts.

Glad to help!